The Value of Information
Technology
Anheuser-Busch Companies, Inc.
September 29, 2003
AGENDA
• Anheuser-Busch Overview
• Why is there I.T.?
• Value of I.T.
• Examples
• Questions
QUALITY
A COMPANY OF FIRSTS
Pasteurization
Refrigerated Railcars
Extensive Bottling
INDUSTRY
LEADER
SINCE 1957
Nearly 5 out of every
10 beers sold today
ANHEUSER-BUSCH
• 100+ million
barrels in 2001
• 12 domestic
breweries
• 2 international
breweries
More Than 30 Brands
+3 Billion Gallon Capacity
Corporate Overview
Anheuser-Busch, Inc.
Metal Container
Corporation
Anheuser-Busch
International, Inc.
Busch Agricultural
Resources, Inc.
St. Louis Refrigerator
Anheuser-Busch
Car Company
Recycling Corporation
Corporate Overview (continued)
Precision
Printing
Longhorn Glass
Busch Media
Group, Inc.
Busch Entertainment
Corporation
Manufacturer’s Railway
Company
Busch Properties, Inc.
Invested More
Than $375 Million
I.T. is Part of the Business
• A-B Companies is a $16B Business
• A-B spends approximately $200MM
on Information Technology
• There are approximately 1,300
employees and contractors working
on Information Technology
Management Systems
Group
Mission for MSG
A-B Business Growth
• Through the systems we build, run, and maintain for our
customers
• Through the business strategies we support
Cost Reduction
• Business initiatives enabled by Information Technology
• Internal MSG cost reduction initiatives
Standardization and Service Excellence
• In maintenance and replacement of infrastructure
hardware and software
• Service delivery to both internal and external customers
MSG Message to Our Employees,
Customers, and Vendors
• We are not an Information
Technology company.
• There will be no Information
Technology driven initiatives.
Overview of MSG
Design, Develop,
& Install
Systems
Development
•
•
•
•
Supply Chain
Sales and Marketing
Finance & HR Systems
Purchasing Systems
Operate & Maintain
Applications Support/Maintenance
Data Center
• Centralized
Information
Processing
Network
• Communication
• E-mail
• Internet
Desktop
• Personal
Computers
• Help Desks
MSG designs, develops, installs, and runs
the systems that are key to A-B Business Operations.
Evolution of Information Technology
Automation of
Work
Management of
Information
IT
Business
IT
Business
IT
Transformation
of Business
Business
Investments are increasing and...
... complexity is increasing!
Why is there IT?
• Support the business
– Increase sales
– Decrease cost
– Defensive posture
• Strategic in nature for most organizations
– CRM, PLM, Order Mgmt, Account Mgmt, Internet,
Accounting
– IT is all along the value chain
Example
• We work for a company that sells computer
products to the general public using the
Internet
• The sales department has requested to add
a set of “My” features to the website (I.e.
my.yahoo)
• As the IT department what are the next
steps on this project?
IT is the Business
• IT doesn’t exist without the business
• IT exists only to enhance the
business
• IT Supports the business
– Increase sales
– Decrease cost
– Defensive posture
There will be no Information Technology
driven initiatives.
Increase Sales
•
•
•
•
•
•
•
Reduce order fulfillment cycle time
Increase order quality (reduce stockouts)
Determine and set pricing
Rationalize discount pricing
E-commerce to acquire new markets
Improve product quality
Improve customer service
Decrease Cost
•
•
•
•
•
•
•
Leverage buy capability
Warehouse fork truck continuous moves
Automated guided vehicles
Transportation backhaul opportunities
On-line bid purchase or sale
Supplier collaboration efforts
Increase product quality (reduce defects)
Defensive Posture
•
•
•
•
Follow the leader
Y2K
Replacement systems (old, lost support)
New e-commerce companies
– Order consolidators
– Buy consolidators
• Infrastructure
Other
• Product awareness
• Environmental
• Community awareness
Link to the Business
IT Projects
Business Objectives
Business Strategy
Example 1
Supply Chain Initiative
Business Driven Project
Supply Chain Vision
Business Strategy:
Reduce the total supply chain costs while
improving product freshness and customer
service.
Targeted Business Objectives:
• Support purchasing in reducing packaging material price
by improving supplier costs
• Support operations in reducing brewery conversion costs
• Reduce cost of transportation of full goods, trade returns,
and packaging materials
• Avoid capital spending through asset utilization
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Supply Chain Scope
 The integration of all activities that are part of the process of going
from raw materials to delivering finished products
 Its success requires a balanced scorecard that measures the success
of the whole, versus the parts
Planning, Scheduling & Execution Processes
Suppliers
Brewing
Packaging
Wrhse/Shipping Wholesalers
Management / Infrastructure Requirements
Retail
Supply Chain Initiative
Stability
Lowers Costs
 The Leadership Team believes increasing stability will
lower Supply Chains costs.
 We will measure key Performance Indicators (KPI’s) of
stability.
 We will track Total Supply Chain cost per barrel.
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The Supply Chain Program
Four Major Initiatives for
2001 / 2002
Strategic
Network Models
• Create a facility
location model to
analyze optimal
locations for
production and
distribution facilities,
responding to shifts
in demand and
minimizing all
relevant costs
• Create a weekly
planning model that
fully integrates
brewing and
packaging decisions
and minimizes all
relevant costs
Transportation
Advantage
• Increase inbound
packaging material
backhaul
• Integrate
Transportation
Advantage objectives
into shipment and
production
scheduling
Shipment & Production
Scheduling
• New material requirements
planning for packaging and
support materials
• Postpone order content
decision by utilizing the most
up-to-date information
• Reduce the freight costs of
trade return movements
(cooperage and pallets)
• Rollout web based schedule
exchange to all plants and
selected suppliers BudExchange.com
Supply Chain
Scorecard
• Provide a tool to
ensure all Supply
Chain costs are
measured (current
prototype is bottle
only)
Summary
• This project will deliver improvements in:
– Management and purchasing of direct materials and
supplies
– Order Filling decision through automation
– Facility location decisions
– Trade return management
– Inbound packaging material backhaul
DCFROI . . . . . . . . . . . . . . . . . . . . . .17.4%
Total Spending . . . . . . . . . . . . . $ 20 MM
Average Yearly Savings . . . . . $
6 MM
NPV at 9% . . . . . . . . . . . . . . .$ 2.4 MM
Years to attain
Hurdle Rate . . . . . . . . . .4.5
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Example 2
IT Process Improvement Project
Manufacturing Process
Materials
Finished
Goods
Manufacturing
Standard Operating Procedures
Machinery
Skilled Labor
Improve
Measure
Our plants are very efficient, due to stringent operating
procedures, efficient equipment, and skilled labor
Software Manufacturing
Business
Requirements
Software Development
Systems
Methodology
Tools
Skilled Labor
Improve
Measure
With a stringent approach to Software Development, cost and time
to deliver can be significantly reduced while improving quality
Standardization Benefits
Industry estimates 5 – 40%* savings of development
and operational costs at maturity (4-5 years)
Reduced
Cost
Standard
Process, Tools
and Metrics
Productivity
Reduced
Cycle Time
Reuse
Increased
Quality
* - compilation of sources – META, Gartner, AG Edwards, SBC, Transcentric, VISA
Business Benefits
Increased
Quality
Reduced
Cycle Time
Decreased
Cost
More Benefits
Realized
Sooner
+
=
Higher ROI
IT standardization will result in compounded
benefits for subsequent IT projects with an ROI
ABPG IT Objectives
• Implement standard process, tools,
training and the supporting measurements
to enable on-going productivity
improvement:
– Implement metrics collection around
productivity, quality, cost, and continue
customer satisfaction
– Increase IT productivity 20% by 2007
– Decrease IT defects 20% by 2007
– Reduce IT cycle time 20% by 2007
– Establish a foundation for continuous
IT will contribute on-going cost savings to our Business Units
improvement within the IT department
PI and Reuse Savings ($M)
Deferred Dev.
Expense Dev.
Hardware
Total
Year 0
2003
Year 1 Year 2
2004
2005
Year 3
2006
$ 150
$ 150
$ 240
$ 270
$ 60
$ 570
$ 440
$ 440
$ 580
$ 600
$ 100
$ 100
$ 1,120 $ 1,114
$ 360
$ 420
$ 80
$ 860
Year 4
2007
Annual recurring savings of $1,140 M beginning in year 4
Investment ($M)
Year 0 Year 1 Year 2 Year 3 Year 4
Imp. Labor
Capital
Support
Total
2003
$ 800
$ 600
2004
$200
-
2005
-
2006
-
2007
-
$ 200
$ 1,400 $ 400
$ 200
$ 200
$ 200
$ 200
$ 200
$ 200
Total Cost
Total Incremental Savings
ROI (3.2 years)
$ 1,400M
$ 1,140M
27.6%
Project Scope
Governance
Rational Rose
Requirements
Microsoft .NET
Design
Develop
Test
Support
Methodology / Process
Standards / Guidelines
Training / Mentoring
Performance Measurement
Use MSG’s .NET standardization effort as the base,
purchase what we can, and build the rest
How Will We Save - Measure
$7.00
Productivity
Cost per Defect
$1,400
$6.00
$1,200
Cost/FP
$5.00
$1,000
$4.00
$800
$3.00
$600
$2.00
$400
$1.00
$200
$0.00
$-
Jan Feb Mar Apr May June July Aug S ept Oct Nov Dec
16%
14%
12%
10%
8%
6%
4%
2%
0%
Reuse Efficiency
Jan Feb Mar Apr May June July Aug S ept Oct Nov Dec
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
02
02
03
03
03
03
04
04
04
04
IT will apply metrics and measurement in the
same way our plants do today
Project Summary
• This project will deliver a foundation for continuous
improvement and establish on-going cost and quality
improvements:
– Quicker development life-cycle
– Consistency in practice
– Reuse
– Less rework
DCFROI
Total Spending
Average Yearly Savings
NPV at 8%
Years to attain Hurdle Rate
27.6
$ 1,400 M
$ 1,140 M
$ 780 M
3.2
Summary
• IT is part of the business, it supports
and enhances the business
• IT doesn’t exist without the business
• Learn the business of your company
Questions?